Hacking Your Finances: Making Your Credit Cards Work for You

Who knew a trip to Thailand could be free? Well, almost. Using credit card rewards, my fiancé and I were able to pay for two round-trip tickets. Our other trip expenses came with no foreign transaction charges and no ATM fees, and we received over 2% cash back for every purchase. That’s right—our credit cards paid us for the added convenience they brought to our lives.

While the nefarious practices of credit card companies get the most attention, very little attention is aimed at helping consumers use the system to their advantage. If you are a disciplined credit card user who pays off your credit card in full every month, there is a gold mine of rewards that could be waiting for you. Here are some of the ways I have made my credit cards work for me.

Sign Up for Rewards

Several years ago, I realized that the oldest credit card I had offered me exactly nothing in rewards. Since I didn’t want to get rid of the long credit history with that company, I called and asked what they could do. They offered to switch me to a card with no fee that offered cash back and a statement credit. Moral of the story: Make sure that you are getting all that you are entitled to from every provider.

Match Your Rewards to Your Lifestyle

Do you travel internationally? If so, try the Barclay Arrival Plus or the Chase Sapphire Preferred cards, which offer travel credits, no foreign transaction fee and a microchip. Spend lots on gas and groceries? The American Express Blue Cash Preferred card offers a whopping 6% and 3% cash back on each of those categories, respectively. Want simple cash back rewards without worrying about specific categories? The new Capital One Quicksilver Cash Back Rewards card gets you 1.5% cash back on all purchases, all the time. A wide variety of rewards are offered, so find the ones that you like and will use the most.

Be Aware of Annual Fees

Don’t worry. Not all annual fees are bad. In fact, some of the cards that offer the best rewards charge an annual fee (the American Express card above is one example, charging $75 annually). If there is a cost to use your card, estimate if the extra rewards will net you a higher benefit. For example, the no-fee version of the AmEx card gives only 3% cash back on groceries, half of what the paid version offers. If you spend more than $2,500 a year on groceries alone, you have made up the cost of the fee.

Diversify Your Rewards

Some people prefer to have one go-to card, while others do not mind having several. I use one card for all my travel expenses, another for gas and groceries, and a third for everything else.

If you are going to use multiple cards, be mindful of your credit. There is a growing movement of people who “churn” their credit cards for rewards, jumping from one sign-up bonus to another. Just remember that every time you apply for a new card or close an old one, your credit score may be affected, and that may impact your ability to get a mortgage or auto loan. As a general rule, leave open the cards that have the longest credit history and/or highest credit limit.

Your relationship with money can both help and hurt your chances for financial success. Our five-minute quiz will help you identify your dominant and dormant financial archetypes and suggest a course of action.